Look for long-term successes from the Utica shale

Dr. Iryna Lendel is the assistant director of the Center for Economic Development at Cleveland State University's Maxine Goodman Levin College of Urban Affairs

Debates over local employment in the oil and gas industry seem to resurface in Ohio time every time new data are reported by a state agency or a researcher. Advocating for the shale gas industry to employ Ohioans has both political and civic appeal, and many people measure the benefit of the Utica shale's development in terms of the involvement of local labor and the industry's contribution to the state economy. The more local labor that's used, the greater the benefit, the thinking goes. Many also assume that if developing companies do not employ Ohioans, they will bring workers from other states. But, for me as an economist, it is not about whether we do or do not want “foreigners” to work in Utica development; it is more about how to secure the largest economic benefit for the Ohio economy from the play's development overall and what can we learn from other states to maximize the positive effects.There are six major shale plays currently under development in the United States: the Bakken, Barnett, Haynesville, Eagle Ford, Marcellus and Utica shales. Most of them — except the Bakken, which got started in the late 1990s — began their exploratory drillings in the early 2000s and picked up massive development between 2004 and 2009. Many studies of the economic benefits of shale development identified two industries that reflect drilling and completion activities — drilling oil and gas wells (NAICS 213111) and support activities for oil and gas operations (NAICS 213112). The total employment in these two industries in the United States doubled as more than 190,000 jobs were added between 2001 and 2011. They added 115,012 jobs just between 2009 and 2012.The six major shale developments primarily are associated with the economies of five states: Louisiana, North Dakota, Texas, Pennsylvania, and Ohio. These states added 85,062 jobs between 2001 and 2011, and more than half of these jobs (45,619) were created between 2009 and 2011 (2012 data by state are not yet available from the Bureau of Labor Statistics).

Texas and Louisiana gained the most jobs, but not necessarily because they exported labor to other shale states. Workers from Oklahoma, Colorado, Wyoming, California, and New Mexico, all states with a long history in oil and gas development, account for almost 25% of the total U.S. labor in these two core oil and gas industries.Without any of their own major shale deposits per se, the employment in these states in the two core oil and gas industries grew by 36,293 jobs between 2001 and 2011, with about half of those jobs created between 2009 and 2011.

Learning from others

We cannot blame specialized economies of traditional oil and gas states for expanding their labor markets beyond their states. We need to learn a lesson for Ohio and accept the fact that employing local labor to the industry, which has a historically thin presence in the state economy, takes time. The work force must be trained, prepared and offered to the industry at the right time and on the right scale.Texas has increased its employment in core oil and gas industries by 80% since 2001, creating jobs for an additional 60,729 workers.North Dakota increased its core oil and gas employment by more than 500%, from a much smaller base, and added 8,823 jobs between 2001 and 2011.Marcellus shale development in Pennsylvania boomed much later, in 2008, and riding the wave of high gas prices, it increased the use of local labor in shale development by 222% between 2008 and 2011, adding 9,128 jobs in that period. The commonwealth employed 13,238 people in drilling oil and gas wells and support activities for oil and gas in 2011.Ohio's Utica development in 2012 was where Pennsylvania's Marcellus development was in 2008, but we are entering the gas play at a time when the commodity is fetching historically low prices.

We probably can't expect to realize big gains for local labor in these two core oil and gas industries before the end of this year. But that's not necessarily a cause for concern; we want to invite industry specialists from Oklahoma, Texas, and Colorado to help us increase the pace of the Utica development. We need to benefit from their knowledge and learn from their mistakes and advancements, while we continue to introduce tighter and smarter regulations and improve the business environment here. We want to learn from Pennsylvania and Wyoming how to adapt to the oil and gas industry players that are flooding those states with labor. Staffing two core oil and gas industries with local labor is a good indicator of success and usually it goes hand in hand with engaging local labor in construction, professional and personal services, and manufacturing — sectors that have been getting a boost from Ohio's shale boom for the last two years.Neither simply offering available labor in Ohio nor making political appeals will effectively persuade producers to abandon their long-term contractors and turn to local labor force. But energy companies and their suppliers can be attracted to hire Ohioans if our labor offers them a competitive advantage.We already have inherited one — we are local. We are also hard-working and fast-learning people; groomed by decades of manufacturing culture.Further training and development in the fields demanded most by drillers and their vendors, as well as using training programs, apprenticeships and our state's wealth of colleges and universities, will help. But in the meantime, I think we need to adjust our way of thinking and look beyond just the local jobs that drilling will produce.We need to understand that this is not a “fracking industry” but an entire economy that will grow and eventually result in natural gas-fueled cars, cleaner sources of electricity, and a new source of exportable plastics and petrochemicals. Those are all things that will not only increase the number of well-paying jobs in Ohio and the nation, but that will improve our economy and national energy security at the same time.

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